Russia's economy shrank by 4.6% in the second quarter of this year, posting the worst performance since the crippling recession of 2009, the state statistics agency reported Monday.
Russian consumers have also been hit by the eroding value of the ruble. The currency has dropped to 64 to the U.S. dollar, boosting inflation to 15.6% in July and propelling a decline in buying power with its depreciation of 43% over the last year.
The most damaging influence on the Russian economy is attributed to the slump in oil prices, which are roughly half what they were a year ago and down 20% in just the last six weeks. Russia counts on oil and gas sales to generate more than half of its national budget revenue.
U.S. and European sanctions imposed more than a year ago in punishment for Russia's seizure and annexation of Ukraine's Crimea region also have taken their toll. And Russia's retaliatory ban on imports of European Union food products has spread the pain to many of the 28 member countries that enjoyed brisk trade with Moscow before the measures were invoked.
Russia's second-quarter year-over-year gross domestic product contraction was more than twice the rate of the first quarter, when the economy shrank by 2.2% compared with the first quarter of 2014. It also exceeded the Russian Economy Ministry's forecast of 4.4% economic decline this year.
Car sales in Russia are projected to drop by 36% this year
In June 2015, the Worldbank projected Russia's GDP would contract by 2.7 percent in 2015, before reaching 0.7 percent in 2016, and 2.5 percent in 2017. This was assuming an average oil price of US$58.0 per barrel for 2015 and of US$63.6 per barrel for 2016.
Currently West Texas oil is at $44 per barrel and Brent is at $50 per barrel.
Nextbigfuture has previously looked at the currency problems in Russia, the possibility of a depression (where the economy contracts by 10%) and where Russia could run out of liquid financial reserves.